The prize our leaders cannot afford to drop

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The Independent Online
AWORLD-sized political breakthrough, or desperate hype from seven discredited leaders? The Tokyo trade agreement, announced with almost hysterical glee, has been interpreted both ways. There have been surprised hosannas from free-traders who expected little from the G7 summit. But there have been raspberries from sceptics who point out that the detailed talking is still to come and that many of the toughest issues blocking a world trade deal were avoided.

On balance, there is a serious danger that, for once, we have some good news to digest. The summit has made a Gatt deal this year more likely. We have been saying much the same for several years now, but Tokyo has ratcheted things forward. The leaders of the four largest trading blocs have said that their tentative agreement could create 3 million extra jobs over the next decade. They have told us they are saving the world from the horrors of trade war.

And their accord is, at face value, big news: for instance, it would cut total duties on trade between the 275 million North Americans and 300 million Western Europeans by around 40 per cent. Translating that straightforwardly into X or Y million jobs is politicians' wind - look how great strides in productivity and output have failed to halt European unemployment. But this is, by any standards, a lot more trade, a lot more wealth. To allow that prize to drop from their hands over the next few months would be evidence of incompetence and selfishness which none of the G7 leaders can afford.

That does not mean, however, that free trade is secure. Far from it. Despite some momentum on Gatt and the beatification of Adam Smith by international summiteers, the danger of the rich countries closing themselves off as protectionist trade blocs remains acute. And the problem begins at home, in Europe.

Parts of Europe have had a long protectionist history. The new conservative administration in Paris, taking a tough line in defending its agricultural base, is being, well . . . very French. Before the Revolution, the French Physiocrats were advocates of free trade well ahead of Adam Smith. But things have gone downhill since then: today many French politicians regard free trade as an Anglo-Saxon perversion, akin to cricket or hitting children.

For France, there are issues of national identity involved. Despite the small proportion of people still working the land, the integrity of the French countryside is central to the national psyche - and therefore to national politics. The emptying of la France profonde is a far more serious threat to French identity than Maastricht ever was. This traditional, cultural protectionism is well understood by France's neighbours. There is even some sympathy for it.

Much more worrying is what senior politicians and diplomats see as (in the words of one) 'a new period of neo-protectionism, armed with some very seductive arguments'. This can be found throughout the EC and Scandinavia and reflects a belief that Europe cannot close its competitive gap with China and the other emerging industrial powers unless it cuts costs to a level that any Western democracy would find unacceptable. Therefore, the argument goes, some form of managed trade, protected by tariff barriers, is becoming essential. Not if, but when.

This is pernicious nonsense, of a kind that often becomes current during recessions. Economies with a future invest, modernise and innovate to keep ahead. Tariff barriers, by contrast, are the resort of decadent political systems and of economies that have decided to turn away from the outside world because they cannot compete there. Tariff walls bring short-term relief but longer-term disaster. Perhaps the worst legislation enacted by the democracies between the wars was the tariff wall built round the United States in 1930 and London's system of imperial preference two years later.

For the EC to put up economic walls would be evidence of a radical failure of nerve - more eloquent, even, than its unwillingness to grapple with Balkan slaughter and dictatorship. Both cases raise the question: what is 'Europe'? Whatever else it is, it is not an island. It contains some of the richest areas in the world but some pretty poor ones too, inside and around the Community. Just where are rich Europe's borders? How high are its physical barriers?

Just as rich ghettos can only cower for so long inside poor and desperate countries, hiding behind barbed wire but knowing no real peace, so the rich parts of the world will find no lasting security behind tariff walls. If they do not take the goods of the poor world, they will assuredly get millions more of its people. The Community has a crescent of poorer countries to its east and Africa to its south - Africa, whose population growth is 10 times as fast as Europe's. This week's UN report warning that mass migration may become 'the human crisis of our time' needs to be read alongside the Tokyo statement on trade.

John Major, whatever his domestic failings, understands the free trade case instinctively and argued it vociferously during the Copenhagen summit. But the argument has not been won, and won't be until Europe's politicians say the same at home as they say in Tokyo. This great choice will dominate EC politics over the next six months, as the Commission struggles to produce a report on productivity and employment inside the EC before the Brussels summit. No debate matters more. The wrong choice would . . .

But I nearly forgot. This week brought some good news. Enough wailing, already.

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